Costco Analysus

1178 Words5 Pages
Case Study

Competition among the North American Warehouse Clubs:
Costco Wholesale versus Sam 's Club versus BJ 's Wholesale

Trevor McAlmont
Chaoying Shen
Keyue Zhang
Wenjun Zhou

The overall Business Strategy of Costco encompasses ultra-low prices, limited selection of nationally branded and private label products, treasure hunt shopping environment, low operating costs, strong growth and effective HR management (Thompson, 2011, p. C-57). With high sales volumes and fast inventory turnover, Costco is able to maintain good working capital. This allows Costco to be an overall low-cost provider.
PEST Analysis of Warehouse Club Industry
• Trade regulations • Health and safety
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The suppliers to the wholesale clubs cannot put much pressure on their wholesale clubs to gain better/higher prices because their items are readily available from many other suppliers. The item being supplied are commodities that are readily available from many suppliers at the going market price, industry members’ switching costs to alternative suppliers are not high.
Bargaining Power of Buyers (Customers)—a moderate Wholesale club members are numerous and buy in relatively small quantities, with no single member accounting for a meaningful fraction of a wholesale club’s total sales. Consequently, individual members of wholesale clubs have little power or leverage to bargain with a wholesale clubs over the prices they will pay. Any member can choose not to purchase a particular item and obtain it from another retailer and can also choose not to renew their membership, but this does not give any bargaining power. Even though members have low switching costs, they cannot negotiate for better prices or obtain any benefit beyond what their membership card provides. Buyers are very price-sensitive. However, buyers are small and numerous relative to sellers.
Threats of Substitute Products or Services—a moderate - strong competitive force
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